India could step up crude imports from Iran next month and start transferring billions of dollars it owes for oil as early as next week, following a deal between Tehran and six world powers to curb the Islamic Republic's nuclear programme.

The agreement eases some of the sanctions on trade with Iran that have slashed the OPEC member's exports by more than half and cost it as much as $80 billion in lost oil sales since the beginning of 2012, according to White House estimates.

Iran's biggest oil buyers - China, India, South Korea and Japan - have all cut back sharply on purchases.

The deal, struck on Sunday, also suspends sanctions provisions on insurance, which had left refiners that processed Iranian oil without cover and resulted in India's imports falling to below even the level permitted by sanctions.

The removal of the EU restrictions on insurance opens the door for Indian refiners to increase imports to contract levels without breaching sanctions that remain in place limiting Iran's overall exports to around 1 million barrels per day (bpd).

"Till yesterday this crude was not under consideration because of insurance hurdles, but now because of this recent development ... Iranian crude has come into active consideration of HPCL," B. K. Namdeo, head of refineries at state-run Indian refiner HPCL, told Reuters.

For HPCL, that could mean an extra 50,000 barrels per day (bpd) in December to March - about a quarter more than India's daily average Iranian imports over the first nine months of 2013.

BANK TRANSFERS

The United States had tightened the noose further on Iran's biggest revenue stream in February by asking its oil buyers to stop transferring payments to Tehran and instead keep the money in bank accounts in the currency of the importing country.

Effectively shut out of the global banking system, Iran has been able to use that money only to buy goods and services from the importing country and the cash in those accounts has quickly built up.

The new agreement would let Iran receive about $4.2 billion in oil money from accounts held abroad if it fulfils commitments under the deal over the next six months. It is unclear how much Iran will receive from each country.

A joint commission from Iran and the six powers is supposed to decide which foreign banks can transfer the money to Tehran, what currency they will use, and which Iranian banks will get the cash, a senior US Treasury official said on Monday.

The transfer of Iran's oil funds will likely be done by banks that already have Iranian accounts, the official said.

India is Iran's second-largest buyer and owes Tehran about $5.3 billion for oil shipments, according to government and refining sources. Payments by Indian refiners to Iran could resume through Turkey's state-run Halkbank, a route used until February.

The National Iranian Oil Company (NIOC) asked Indian refiners in mid-October to settle some of their payments in euros via Halkbank as soon as possible. Refiners are awaiting the all-clear from the Indian government before transferring any cash.

"Next week if it is possible, we will start making our payments," said P.P. Upadhya, managing director of Mangalore Refinery and Petrochemicals Ltd, one of the Indian buyers of Iranian crude.

A government official also said payments would be expedited once the payment mechanism via Turkey opens up.

"If that Halkbank route opens up ... rather than pushing this to a later date, perhaps this money will go to the Iranians sooner rather than later," said the official, who had direct knowledge of the matter.

The transfer of funds may help the US Treasury Department more closely monitor how Iran plans to use the cash, the US official said.

"One of the things that we spend a lot of time doing is looking at how the Iranians are trying to access this stranded revenue, and heading them off at the pass," the official said.

"And I think the Iranians know if they continue to try to continue to get access to any of this revenue in other fashions (outside the agreement), that that's going to blow up the deal."

Banking and industry sources in South Korea and Japan said they were awaiting details of the weekend agreement before they could decide on how to transfer money to Iran.

South Korea has $5.56 billion stuck in bank accounts, with a similar amount held up in Japan since the beginning of the year, according to sources.

In China, Kunlun Bank, owned by China National Petroleum Corp, holds the Iranian oil dues. Iran has previously said China, its top oil buyer, owes it around $22 billion.

IRANIAN EXPORTS

The 1 million bpd ceiling on Iranian exports is sharply below the pre-sanctions level of around 2.5 million bpd and gives Iran very little room to boost sales. Its oil exports in the first nine months of the year have averaged about 1.08 million bpd, according to Reuters data.

Of the total, China bought nearly half, followed by India and Japan, which bought about 194,000 bpd each. South Korea purchased 137,000 bpd, while Turkey took about 100,000 bpd.

HPCL's Namdeo said the refiner would resume crude imports if Iran continued to offer current conditions. He did not elaborate.

Industry sources have said Iran is offering free delivery, which saves on freight rates of up to $1 a barrel, and a small discount on the crude price.

India's shippers, meanwhile, would be keen to resume voyages to Iran if they can now get full insurance, the Shipping Corporation of India said in an email, adding it would ask New Delhi to use Indian vessels.

Until now, buyers of Iranian oil had to show a continuous reduction in purchases to qualify for a six-month waiver from US sanctions. The next review for most of the buyers is due soon.